Challenge: If taxes increases for “the rich” are a good thing, members of Congress and presidential candidates (all part of either “the rich” or “super-rich”) don’t have wait for the Bush tax cuts to expire or for Congress to pass new tax legislation, they can immediately raise taxes on themselves voluntarily by making a gift to the U.S. Treasury.
Here is the link to the Treasury’s website with instructions for politicians, presidential candidates, or any citizen like Warren Buffet who wish to make a general donation to the U.S. government into an official account called “Gifts to the United States.”
Question: What if Edwards or Clinton proposed legislation to force everybody to “donate” 5 pints of blood every year. Wouldn’t it be a lot more credible if they were already donating blood themselves right now voluntarily, and not waiting until they were forced to “donate” blood by their own legislation?
This is from a previous CD post, and I mentioned on Larry Kudlow’s radio program today that I would re-post instructions on how politicians and Warren Buffet can pay extra taxes to the U.S. Treasury.
Update: I’ll be appearing on Larry Kudlow’s radio program this morning (Saturday), you can listen live here at WABC, should be between 10:30 a.m. and 11 a.m. EST.
The graph above shows that the M1 money supply has been flat for three years, and is actually lower now than it was a year ago, suggesting that Fed policy has been TOO TIGHT.
See previous post where I suggested that the Fed Funds rate should be about 3-3.25%.
The bottom chart allows for a 3-year lag between growth in the money supply and its eventual full effect on the price level and inflation (average annual inflation), and therefore matches M1 growth in 1998 with consumer inflation in 2001, etc.
November 2006-November 2007 inflation was 4.29%, and inflation averaged 2.72% for the year to date, reflecting the strong money growth in 2004 of 5.58% (allowing for a 3-year lag). The good news on the inflation front is that inflation in 2008 will reflect money growth in 2005 (assuming a 3-year lag), which was less than half (2.05%) of money growth in 2004 (5.58%).
Bottom Line: Inflation will not be a problem in the future, and will likely fall in 2008 and 2009 from its level in 2007. The money supply has been flat now for 3 years, suggesting that inflation in the future will be low and stable. The money supply (M1) has actually FALLEN over the last year.
Tune in to CNBC’s “Kudlow and Company” on Monday night (7 p.m. EST) for an economic smackdown between Robert Reich, former labor secretary under Clinton, and free-market Austrian economist Mark Skousen, on the question, “What drives the economy–consumer spending or business investment?” It should be an interesting debate between a demand-side Keynesian and a supply-side Austrian.
The graph above shows that retail sales is not a leading indicator of the economy, does not predict recessions (shaded areas) and is probably one of the most stable and boring economic variables. Notice in the graph above that retail sales almost never decline, even during recessions (shaded areas). Industrial production, on the other hand, is an excellent indicator of the business cycle. Notice the significant decline in industrial output in each of the last four recessions.
Conclusion: According to Skousen, “Productivity and investment are driving forces in the economy; consumer spending is the effect, not the cause, of prosperity. Say’s law (supply creates demand) trumps Keynes’s law (demand creates supply)!”
For more information check out Mark Skousen’s book “The Structure of Production.”
According to the Federal Reserve’s report today, total industrial production in November 2007 was 2.1% above its level in November of last year (see chart above). This was also the highest output growth since the first quarter of 2007 (March), and marks the 51st consecutive increase in year-to-year growth in Industrial Production (June 2003 was the last month of negative growth).
On a quarterly basis, industrial output in the fourth quarter is matching growth in the second and third quarters, when GDP growth was 3.8% and 4.9%. The current estimates of real GDP growth in the fourth quarter of 1.5% might turn out to be too low, given the continuing strength in manufacturing output.
Bottom Line: Given the continued robust growth in both real output and retail sales into the fourth quarter, the economy appears to remain on solid ground, and the economic expansion is on track to continue well into 2008.
Slate Magazine had an interesting article several years ago after the March 2005 Congressional hearings about steroid use in baseball, where Mark McGwire and others were required to testify. The article posed an interesting question, now relevant again with the recent MLB report on steroids: If steroids are cheating, why isn’t LASIK eye surgery?
Scores of pro athletes have had laser eye surgery, known as LASIK (Laser-Assisted In Situ Keratomileusis). Many, like Tiger Woods, have upgraded their vision to 20/15 or better. Golfers Scott Hoch, Hale Irwin, Tom Kite, and Mike Weir have hit the 20/15 mark. So have baseball players Jeff Bagwell, Jeff Cirillo, Jeff Conine, Jose Cruz Jr., Wally Joyner, Greg Maddux, Mark Redman, and Larry Walker. Amare Stoudemire and Rip Hamilton of the NBA have done it, along with NFL players Troy Aikman, Ray Buchanan, Tiki Barber, Wayne Chrebet, and Danny Kanell. These are just some of the athletes who have disclosed their results in the last five years. Nobody knows how many others have gotten the same result.
And although consumer spending at gas stations increased by 5% this year, that is actually less than the gains in spending for clothing, food and health products. Further, if you take gasoline sales out of retail sales completely, consumer spending is still up 4.2% from last year. Higher gas prices contributed only 1/10 of 1% to overall consumer spending (see chart above)!!
Bottom Line: Despite the perception of widespread consumer gloom and pessimism, the November spending spree reflects a much more optimistic and upbeat American consumer.